PAS 16: PROPERTY, PLANT AND EQUIPMENT

INTRODUCTION

- Property, plant and equipment (PPE) are tangible items that:

(a) are held for use in the production or supply of goods or services, for rental to others, or for
administrative purposes; (for example: land, buildings, and machinery) and
(b) are expected to be used during more than one period (long-term assets that are used in the
operations of the business)
(IAS 16 parag. 6)
- Property, plant and equipment does not include:

(a) biological assets related to agricultural activity (see Section 34 Specialised Activities); or

(b) mineral rights and mineral reserves, such as oil, natural gas and similar non-regenerative resources.

(IFRS for SMEs Section 17.3)

- PPE is crucial aspects of a company’s operations, as it can affect the company’s profitability and
competitiveness.

- According to study published in the Journal of Accounting and Public Policy, PPE is a significant
component of a company’s balance sheet, and its accurate reporting is essential for investors and other
stakeholders.

- Another study published in the International Journal of Economics and Financial Issues found that the
proper accounting for PPE can improve a company’s financial performance and decision-making.

- The value of PPE is typically recorded on the balance sheet, and any changes in the value of PPE over
time are reported in the income statement.

- International Accounting Standards 16 (IAS 16) is an International Financial Standards (IFRS) issued by
the International Accounting Standards Board (IASB)

- IAS 16 specifies the accounting treatment for property, plant and equipment (PPE) on a company’s
balance sheet.

- IAS 16 also provides guidance on how to determine the cost of an asset, how to recognize and measure
any depreciation or impairment of the asset, and how to present and disclose information about the
assets in the financial statements.

- IAS 16 is intended to improve the comparability and consistency of financial statements across different
entities and industries, and to provide users of financial statements with relevant and reliable
information about a company’s PPE.

- This research paper is comparison of Financial Reporting Standards for PPE and is composed of:

o Full PFRS;
o PFRS for SMEs; and
 o PFRS for SEs.

 The term ‘financial reporting’ encompasses general purpose financial statements plus other
financial reporting. (IFRS for SMEs Section 16-P5)

- Full IFRS sets out recognition, measurement, presentation and disclosure requirements dealing with
transactions and events that are important in general purpose financial statements. They may also set
out such requirements for transactions, events and conditions that arise mainly in specific industries.
(IFRS for SMEs Section 16-P6)

- The IASB develops and issues a separate Standard intended to apply to the general-purpose financial
statements of, and other financial reporting by, entities that in many countries are referred to by a
variety of terms, including small and medium-sized entities (SMEs), private entities and non-publicly
accountable entities. (IFRS for SMEs Section 16-P9)

- That Standard is the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS
for SMEs). The IFRS for SMEs is based on full IFRS with modifications to reflect the needs of users of
SMEs’ financial statements and cost-benefit considerations. (IFRS for SMEs Section 16-P9)